Belgian National Bank Governor Gets It: Bailing Out Spain "Makes No Sense"

Tyler Durden's picture

A week ago we explained quite clearly why instead of encouraging self-defeating, short-termist behavior by promising to save Europe's insolvent countries if and when needed, which does nothing to resolves Europe's problems and make it worse in exchange for a brief respite from bond selling, the ECB should be doing precisely the opposite: encouraging local governments to understand that there is no magic bazooka from the central banks. Specifically we said that "this Catch 22 of confounding cause and event can continue seemingly indefinitely, although in reality it can't. Because fundamentally what the bond market does is keep sovereigns "honest" - just as Schauble said a week ago, Spanish yields at 7% are not the end of the world - instead what they are is a signal to the country to get its spending in control in order to reduce its deficit, and fundamentally get its house in order - yes, that means getting government spending to a sustainable level and firing hundreds of thousands of workers, as well as probably raising taxes even more. It also means pain all around, but the pain is inevitable and will only be worse the longer reality is denied." This logic is so clear that only a lifelong economist, PhD or Goldman apparatchik can not grasp it: sadly that accounts for most of the people "in charge."

Which is why we were delighted to read that at least one person "gets it" - Belgian national bank governor Luc Coene, the same Belgium that is also the clogged heart of the Burtonian bureaucratic labyrinth known as the EU, who told Belgium's two largest newspaper that "buying the bonds of these countries would only serve to weaken the ECB and do nothing to resolve underlying issues of competitiveness.  “It makes no sense for the ECB to start financing those countries,” said Mr Coene, “It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet." Bingo. And not a moment too soon - we really were starting to pull a Mogatu here.

Telegraph has more:

"That would in turn weaken the ECB and do nothing to resolve the underlying problems."


Mr Coene also said that the central bank's efforts to calm markets last summer with around €135bn of additional debt purchases on the secondary market via its Securities Markets programme took away the pressure on politicians to act.


“We haven’t forgotten what happened in August of last year: We bought Italian bonds and right after that the Italian government reneged on its pledges," he said.

Actually your ex-Goldman Italian colleague over in Frankfurt has forgotten all about.

As for the punchline, which would have long been implemented, if only the total loss of (at least) one year of Goldman Sachs banker bonus was not at risk:

“The conclusion is clear: When you take away the market pressure, you take away the pressure on politicians to act.”

In the meantime, the total abortion that is the market, which no longer can discount anything due to the endless political meddling in its affairs, is starting to lose hope that Europe will be saved when Spain announces it is broke (let that sink in).

Spanish and Italian borrowing costs edged up on Friday, following a week of steady falls on hopes that Spanish PM Mariano Rajoy would make a formal request for EU aid, which would then trigger action from the ECB.


President Mario Draghi initially disappointed markets at his monthly press conference by reiterating that "the ECB cannot replace governments," and that countries would have to request assistance from the European Financial Stability Facility (EFSF) before the ECB could step in.


"Even if we were ready to act now, there would not be the grounds for doing so," he said.

We could say more, and get even angrier, but instead we will leave readers with a clip which, since last year, has captured the essence of Europe better than anything.

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Hulk's picture

7% yield isn't the end of the world, its that massive move to 7.25% yield thats the back breaker.

Amazing to watch a small change in yield be the kiss of death...

Silver Bug's picture

Its about time some one of these people wakes up!

economics9698's picture

I just want to thank Tyler, even though he is a …, for letting me post uncensored on these boards.  Not the same in the msm.  

Michael's picture

but the pain is inevitable and will only be worse the longer reality is denied.

That's what I'm counting on, Worldwide!

Dr Benway's picture

While on the subject of things that don't make sense.


Pauly D from reality show Jersey Shore made $11 million last year and advocates investing in gold.


When Pauly D is more astute than most of the world, something is seriously seriously wrong.

GetZeeGold's picture



Actually Pauly D and I have formed an alliance and we're also gathered 8 billion others worldwide.


Sorry looks like you're screwed.


Ayn NY's picture

I've had more intelligent economic conversations with the cashier at Trget than some of mt college professors. I had one professor back in 2009 laugh at me when I expressed concern that Greece was imploding. At least the cashier understands that inflation is higher than what the government claims and we're spending too much money. I'd say that puts her a head of 99% of the people in government.

northerngirl's picture

The cashier lives in the real world.

dwdollar's picture

An exact quote from one of the commenters on that article:


"Gold is actually one of the poorer investments an individual can make. We learned that early in business school.

Google "why gold is a bad investment" and read the WSJ/Marke****ch article, it explains why pretty well."



I wonder how much student loan debt this schmuck has?

Dr Benway's picture

I laughed at that one too..

samcontrol's picture

it,s called "la niña" .....

next two years we get "el niño" , now that is when you can really expect alot of snow.

Cosmosoft's picture


GetZeeGold's picture



Making fun of ABC might be a start.


AssFire's picture

Just don't don't abuse it- fucker!

knukles's picture

Oh come on... I wanna see somebody abuse themself.

slewie the pi-rat's picture

first the tunnel of love

then the bazooka of pain

knukles's picture

Now now, even a Goldman apparatchik gets it.... the pain being the solution (of sorts) it's just that the Pain Venue Does Not Manufacture Events and Deals from which Goldilocks Profits

From Chaos, Profit

Nobody For President's picture

Aw Knucks - every once in awhile you coin an absolute gem:

'From Chaos, Profit' indeed. Good for a Post-it on the trading screen.

Dollar Bill Hiccup's picture

Tunnel of Love ?

French Bazooka

That about says it all.

Yes, it's WB7 envy time. Where art thou oh Banzai?


scatterbrains's picture

through the ponzi turnstile bitchezz!

Neethgie's picture

tell me about the fucking golf shoes

knukles's picture

We had two bags of grass, seventy-five pellets of mescaline, five sheets of high-powered blotter acid, a saltshaker half-full of cocaine, and a whole galaxy of multi-colored uppers, downers, screamers, laughers... Also, a quart of tequila, a quart of rum, a case of beer, a pint of raw ether, and two dozen amyls. Not that we needed all that for the trip, but once you get locked into a serious drug collection, the tendency is to push it as far as you can. The only thing that really worried me was the ether. There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge, and I knew we'd get into that rotten stuff pretty soon.

zhandax's picture

Sounds like a little pleasure cruise we took one boring summer Saturday from Boca down to Miami 20 years ago when I was in the bond biz....

zhandax's picture

Phlebitis, bitches.  You might be surprised at some of the peeps who went to Miami to see Bebe's doctor (10 years before the little episode I mentioned above)

Haole's picture

"When the going gets wierd, the wierd turn pro."

The majority of the EU parliament and the ECB, for starters, are tremendous examples. 

Nobody For President's picture

Where the hell is the nitrous? Really helps with all that other stuff.

A Lunatic's picture

Hand Of Doom


Now you know the scene, your skin starts turning green
Your eyes no longer seeing life's reality
Push the needle in, face death's sickly grin
Holes are in your skin, caused by deadly pin

Head starts spinning 'round, you fall down to the ground
Feel your body heave, Death's hands starts to weave
It's too late to turn, you won't want to learn
Price of life you cry, now you're gonna die!


GetZeeGold's picture



Yeah.....about that. Bill Murray channels Dr. Hunter S Thompson.



Zero Debt's picture

They should convert Dexia debt to equity.

bank guy in Brussels's picture

Not correct as says in the article above, that the interview was with 'Belgium's two largest newspaper' (sic).

De Tijd and L'Echo are the two business newspapers in Belgium, i.e., the largest papers that are the Belgian versions of the Wall Street Journal ... in Dutch and French, respectively (Belgium is about 60% Dutch-speaking and about 35% French-speaking, we have a small German-speaking region as well in our third official language.)

Other papers here are far more 'popular' and larger.

Luc Coene was speaking to his 'target' audience of business owners and investors ... taking the 'hard line' for his audience.

This is a big game in the EU right now ... talk tough like the Germans ... but everyone knows the ECB will print.

Luc Coene and Herman van Rompuy are probably meeting for cocktails and a laugh soon.

Here is a picture of Luc Coene with an article in English in the current online Belgian news

eigenvalue's picture

Bingo. If this Belgian dickhead had been so against ECB purchasing PIIGS bonds, the ECB decision of last week would have been "unanimous with TWO reservations" instead of "unanimous with ONE reservation"

zhandax's picture

It did occur to me what, exactly, was the difference in his statement and the one from Richard Fisher last week; other than he seems the first CB governor in Europe to 'wake up and smell the coffee'?  Is there a path to this becoming a more mainstream view?

HardAssets's picture

Thanks for a Belgian perspective. - - - I read this and thought someone in the New World Order didnt get the word to this guy . . . . "The damned thing is Supposed to crash, so we can offer our globalist bankster solution."

Nobody For President's picture

Bank guy, and many others like him, is still another reason to love ZH - the news behind the news. Reality can be SUCH a bitch.

AUD's picture

Because fundamentally what the bond market does is keep sovereigns "honest"

This fundamentally ignores the reason why sovereign debt is denominated in government chartered central bank credit.

q99x2's picture

We need a systemic change to let the people be represented by the republic.

I saw the same video on a previous ZH post. It reminded me of wood shop in the 8th grade.

I wonder what the long term effects of doing that are? Uh.

slewie the pi-rat's picture

i've found that sniffing glue mitigates the long-term effects of the lacquer thinner...

Nachdenken's picture

.....then say that in Greek, or perhaps Spanish...

NoControl's picture

By now everyone should know that the name of the game is not to bail these countries out to avoid some sort of collapse but to make the the prospect of default so monstrous in the minds of the leaders and people that they think getting one more bailout is worth relinquishing their sovereignty.  Once someone else holds your purse-strings, all you are is a labor pool colony.

As Europe has its member countries, here we have the same thing going on with municipalities and soon whole states declaring bankruptcy, begging Uncle Sam for help.  Help will come when the begging reaches the right kind of desperate pitch.  Then "help" will come with some nasty tasting conditions.

The bigger the plan, the slower it moves.

This frog's in a slow-cooker set for decades.......

Dr. Engali's picture

I'll believe it when I see it. Politicians will do anything to stay in power, even if it means giving up the sovereignty of their country to do so. The Spanish "leaders" will sell out Spain in a minute once the real pressure comes on them. They will do whatever it takes to make sure they get a share of whatever wealth the country has left. After Spain Italy will follow suit.

Vince Clortho's picture

"... they will do whatever it takes ..."

As will the central planners.  This whole circus of financial spasms that has been going on for years is exactly what you described -- The Elite bankers and their political puppets moving from one insane manipulation to the next, all with the aim of maintaining and prolonging their grip on power.

max2205's picture

That was a great movie

nmewn's picture

There ya go, lace the debt binky with LSD and the problem goes long as you keep sucking.

Now why didn't I think of that ;-)